CHAPTER 1 THE INFORMATION SYSTEM: AN ACCOUNTANT’S PERSPECTIVE REVIEW QUESTIONS 1. What are the four levels of activity in the pyramid representing the business organization? Also distinguish between horizontal and vertical flows of information. Response: Operational, Operations management, Middle management, and Top management. Horizontal flows support operation level tasks. The information is highly detailed about the day-to-day operations. Vertical flows distribute summarized information to managers at all levels, and this information flows upward. Instructions, quotas, and budgets also flow downward. 2. Distinguish between natural and artificial systems. Response: Natural systems stem from the atom, while artificial systems are put together by humans. 3. What are the elements of a system? Response: Multiple components, relatedness, subsystems, purpose, and interdependency. 4. What is system decomposition and subsystem interdependency? How are they related? Response: System decomposition is the process of dividing the system into smaller subsystem parts, while interdependency is the interaction between the subsystems. They are related by the degree and nature of the interaction between the subsystems. If a vital subsystem fails, the entire system will most likely fail. 5. What is the relationship among data, information, and an information system? Response: Data are facts which are collected in a “raw” form and made meaningful through processes such as sorting, aggregating, classifying, mathematically manipulating, and summarizing. The meaningful data is considered to be information. 6. Distinguish between AIS and MIS. Response: AIS process financial transactions and certain nonfinancial transactions that directly affect the processing financial transactions. The external financial reporting documents of AIS are subject to legal and professional standards. Consequently, management and accountants have greater legal responsibility for